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Apportioning loan interest between 2 investors

Discussion in 'Accounting, Tax & Legal' started by Maryanne, 20th May, 2008.

  1. Maryanne

    Maryanne New Member

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    I need some help with a spreadsheet that will apportion loan interest beween 2 investors, where there is one loan, and each investor has drawdowns and repayments. I have the loan statements, and therefore know what the interest is, but am having trouble working out how to apportion the interest.

    Any help would be appreciated please
     
  2. Rob G.

    Rob G. Well-Known Member

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    Is this for tax deduction purposes or merely financial ?

    Is it an IO or P&I loan ?

    Cheers,

    Rob
     
  3. Billv

    Billv Getting there

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    It's easy when you deal in percentages of the total borrowings
    eg total loan is $100K
    Borrower A loan is $60K therefore he pays 60% of the total interest + bills
    Borrower B loan is $40K therefore he pays 40% of the total interest + bills

    Cheers
     
  4. Maryanne

    Maryanne New Member

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    Hi Bill, the calculation is for tax purposes and it is an interest only loan. Each investor has been using some of the loan for private purposes, and then redepositing some of the funds back into the loan. It has become very messy.
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    The problem is when there are repayments as well - especially if there is a mixed (investment/personal) use of the funds, the ATO may decide that any repayment will be of the investment funds first!
     
  6. Maryanne

    Maryanne New Member

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    Hi Bob, the loan is interest only and is to claim a tax deduction
     
  7. Billv

    Billv Getting there

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    I suggest you use an accountant to work out what's deductible and what's not.

    You should be using a separate account to deposit your income and for all your private expenses.

    You should investigate the possibility of changing the type of loan and to add an 100% offset savings account for each borrower.

    I'd talk to an accountant immediately and then go straight to the bank.

    Cheers
     
  8. Rob G.

    Rob G. Well-Known Member

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    Read TR 2000/2.

    If this seems unclear then an Accountant is recommended.

    With a spreadsheet, it might be easier to track your respective borrowings separately to apportion interest expense.

    However, joint borrowings have had unfortunate tax side-effects when your Associate makes a repayment it may be deemed to be a partial repayment of YOUR investment loan if you have joint investments. One pays down their borrowing may be deemed to only pay down HALF of theirs and HALF of yours. AND they get to claim your half of the interest deductions that you lost.

    I have even met Accountants who are unsure on this one.

    Please don't say you have mixed any drawings for private use as well .....

    Maybe just go to an Accountant to be sure. There are many pitfalls with interest deductions in anything but the most simple scenario.

    Cheers,

    Rob